No One Should Face
Crushing Debt Alone

Dealing With a Large Amount of Debt? There Is Help.

The current economic conditions have led many people to face the issue of debt. There are many factors that contribute to financial difficulties. Among them are the burst of the housing bubble, job loss, layoffs, divorce and significant medical expenses. Luckily, the government provides an opportunity for those who are drowning in debt to get their heads back above water through bankruptcy.

The Bankruptcy Code allows many individuals a way to eliminate most debt and to receive a fresh start.

Bankruptcy Statistics

Bankruptcy statistics released by the Director of the Administrative Office of the United States Courts (AO) - released in accordance with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) - reveal that 1.4 million bankruptcy petitions were filed during the 2009 calendar year. This is a 32 percent increase in the number of filings over the 2008 calendar year.

Included in the AO's 2009 BAPCPA report are statistics relating to the average amount of assets and the average amount of liabilities as they relate to bankruptcy filings, broken down by district. For the Middle District of Central Florida (which includes Orlando), the numbers indicate that, on average, filers of all Chapters of bankruptcy have $117,007 more in liabilities than assets. For Chapter 7 filings, the average difference was $117,271; for Chapter 13 the average difference was $112,968.

Nationally, the amount of debtor liability rose 53 percent.

According to statistics provided by the United States Bankruptcy Court for the Middle District of Central Florida, through August of 2010 there have been a total of 45,600 bankruptcies filed in the Middle District of Central Florida. Nearly 16,000 of these were in Orlando alone. These numbers indicate that people are not alone; the current economic situation has had an effect on us all, including our neighbors and friends.

Upside-Down Mortgages

Most people buy a home expecting it to increase in value. However, the recent collapse of the housing market has shown that this is not always the case. The recent collapse left many people with homes that are worth less than the mortgage they owe. Combined with the economic downturn, many people are unable to make their housing payments.

For those facing this situation, there are many issues, including the possibility of foreclosure and a house that is difficult (if not impossible) to sell.

James J. Saccacio, chief executive of RealtyTrac, stated that the new wave of foreclosures is being "driven more by unemployment and economic hardship than what we've seen over the past few years."

Faced with foreclosure and upside-down mortgages, many people are choosing to simply walk away from their homes.

However, bankruptcy may present options and solutions to those in this situation, including being able to keep the home.

Bankruptcy

Chapter 7 Bankruptcy

Often called "liquidation," Chapter 7 bankruptcy consists of selling a debtor's nonexempt assets to pay creditors. To qualify for Chapter 7 bankruptcy, the debtor must pass something called the "means test." Generally, the means test is used to determine if a debtor can or cannot pay their debts - the higher the disposable income a debtor has, the less likely that they will qualify for Chapter 7 bankruptcy.

After creditors are paid, most of the remaining debt is eliminated or discharged. This means that the debtor is not liable for that debt and creditors cannot attempt to collect that debt in any fashion. There are certain debts which are non-dischargeable, though, including child support.

Chapter 13 Bankruptcy

Often referred to as a "wage earners' bankruptcy," Chapter 13 bankruptcy allows for the reorganization of debts into a monthly payment to be paid for three- to five-years. After the repayment period has passed, the remaining debt is eliminated, and, as in a Chapter 7 bankruptcy, creditors are not allowed to attempt to collect the discharged debt.

Chapter 13 bankruptcy is often available to those who do not qualify for Chapter 7 bankruptcy and have a regular source of income. Often, the repayment plan lowers the monthly payments the debtor is required to make.

Chapter 13 bankruptcy will allow a debtor to keep the family home, even if the debtor is behind on mortgage payments. Chapter 13 bankruptcy allows the debtor to catch up on any missed mortgage payments over the course of the repayment period.

Both Chapter 7 and Chapter 13 bankruptcy put a stop to debtor harassment. Once bankruptcy is filed, creditors are barred from calling or contacting the debtor in an attempt to collect the debt.

If you are in debt, have fallen behind on mortgage or car payments, are facing overwhelming medical expenses or are worried about credit card debt, there is help. Contact an experienced bankruptcy attorney to discuss your situation and to learn about possible options that you may have to control your debt.

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